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Starting an Airline

boeing.com

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Re: Starting an Airline

#161

Post by disillusioned »

Shenglong wrote: post #142

Here's an investment banker joke I've been hearing oddly often recently: "How do you get a million dollars?" -> "Invest a billion dollars in the airline industry". On a more serious note: there's a lot of talk on this page about the finance and logistics of starting a company like this - but I think the human factor is also worth mentioning. I fly a moderate amount, and whenever I have an hour or so to spare on a lay…

The joke flows a little better as: "How do you make a million dollars in the airline industry?" -> "Start with a billion dollars."

Re: Starting an Airline

#162

Post by tikhonj »

ianstallings wrote: post #154
rayiner wrote: post #149

Earlier quoted context omitted.

> And only through that risk do we see reward. But the little guy working the line, he just wants a paycheck with no risk. This is a bit of pseudo-economics that's popular in the business community nowadays. Risk can be priced, in that it costs money to shift risk to someone else and you can charge a premium for taking on risk yourself. But statements like "only through that risk do we see reward" are just mumbo-jumb…

Well if you can show one example where rewards come without risk I'll gladly cede my position. I just haven't experienced it myself in my life. I guess someone giving me a gift is risk free. But I wouldn't call that a reward.

Reward without risk is the usual definition of arbitrage. Some people make good money that way.

Of course, you can construe any activity to have some risk. After all, there's always the possibility that your currency collapses, or something. However, ignoring that sort of possibility, risk is not necessary to make money in a capitalist system.

Re: Starting an Airline

#163

Post by rayiner »

ianstallings wrote: post #154
rayiner wrote: post #149

Earlier quoted context omitted.

> And only through that risk do we see reward. But the little guy working the line, he just wants a paycheck with no risk. This is a bit of pseudo-economics that's popular in the business community nowadays. Risk can be priced, in that it costs money to shift risk to someone else and you can charge a premium for taking on risk yourself. But statements like "only through that risk do we see reward" are just mumbo-jumb…

Well if you can show one example where rewards come without risk I'll gladly cede my position. I just haven't experienced it myself in my life. I guess someone giving me a gift is risk free. But I wouldn't call that a reward.

Sure. Say you're a bright young Harvard business school graduate. You might choose to either found a start-up, or go to a VC firm and help fund start-ups. The latter path is much lower risk (because you're not risking your own money, but rather that of the limited partners), but statistically you'll also probably come out ahead, financially, going that route.

Or to pose another example, starting a restaurant is probably riskier than starting a B2B software company, but also probably much less financially rewarding.

Re: Starting an Airline

#164

Post by notahacker »

philwelch wrote: post #39
leokun wrote: post #12

Earlier quoted context omitted.

It's very strange given how necessary air travel is. It still surprises me how need and margins are inversely related (luxury goods have high margins, commodities low), but it makes sense. It's the price. The price of travel is so high for most consumers that they're going to optimize on price at the sacrifice of everything else. The cost of flying and operating an airline is so expensive that airlines also optimize…

Not strange at all if you know a little economics--actually it's encouraging. In an efficient market with perfect competition, economic profit (i.e. profit after opportunity cost) will be 0.

The reality is though that virtually no airline routes are "perfectly competitive" (monopolies and duopolies are far more common; many routes are "natural monopolies") and airlines set (and constantly vary and test) their prices at levels they think will maximise yield, not at parity with some "market level" that everyone else charges for comparable routes. The difficulties in achieving profitability are all to do with high fixed costs and limited flexibility, and profits average close to zero largely because bailouts keep the airlines that are losing money in the sky as long as those which are highly profitable.

Re: Starting an Airline

#165

Post by [deleted] »

a3n wrote: post #140
sharkweek wrote: post #78

Earlier quoted context omitted.

I would assume these margins get even thinner and customer service even worse in the future as most people really do just go to a referral site, grab the cheapest flight and call it a day (I mean honestly, where I'm currently at in life, I don't need comfort on a flight, I just need to get from point a to point b as cheaply as possible and I assume this applies to 80% of people flying). I was just on a Frontier fligh…

I go years between flights, so I haven't looked into this, but I've been wondering recently if it would make sense to ship (UPS, FedEx) your luggage ahead of time. Since the airlines are making big profits on luggage fees and penalties, I'm guessing shipping price wouldn't be that much more. What you'd gain is (I assume) more reliable delivery, and the opportunity to know that your luggage arrived before you get ther…

[deleted]

Re: Starting an Airline

#166

Post by dfxm12 »

a3n wrote: post #140
sharkweek wrote: post #78

Earlier quoted context omitted.

I would assume these margins get even thinner and customer service even worse in the future as most people really do just go to a referral site, grab the cheapest flight and call it a day (I mean honestly, where I'm currently at in life, I don't need comfort on a flight, I just need to get from point a to point b as cheaply as possible and I assume this applies to 80% of people flying). I was just on a Frontier fligh…

I go years between flights, so I haven't looked into this, but I've been wondering recently if it would make sense to ship (UPS, FedEx) your luggage ahead of time. Since the airlines are making big profits on luggage fees and penalties, I'm guessing shipping price wouldn't be that much more. What you'd gain is (I assume) more reliable delivery, and the opportunity to know that your luggage arrived before you get ther…

Generally speaking, For domestic flights, one bag, up to 50 lbs costs $25. International flights will get you 1 free checked bag.

I've thought of this as well. It's actually not very practical. Check out UPS shipping fees. Except in very edge cases, they are way more expensive than taking your bag with you.

Re: Starting an Airline

#167

Post by notahacker »

jessaustin wrote: post #26
jacquesm wrote: post #11

Earlier quoted context omitted.

From people who bought the airplanes...

Yes, of course, the theory is clear. I still can't help suspecting that this whole "Startup" organization is a boondoggle so somebody's brother-in-law can be a VP in charge of something harmless. At Boeing's scale, purchases (or leases) of new (or at least new enough to affect demand for new) planes by investors who can't hire their own experienced airline executives will necessarily be a drop in the bucket.

Experienced airline executives often use outside consultants for specific areas of expertise, and national governments have a fondness for starting airlines and purchasing multiple new aircraft. It's probably the only marketing division of Boeing that turns a profit :)

Re: Starting an Airline

#168

Post by radiusq »

pkorzeniewski wrote: post #22

It blows my mind how people start such big businesses. You must build an airport, hire stuff, buy planes, meet many legal requirements and so on, all costing tens of millions of dollars, and on top of that, it must be profitable. This gives some insight, but still it's terryfing. I feel so small.

> You must build an airport

I'm pretty sure you don't need to build an airport to start a new airline.

Re: Starting an Airline

#169

Post by ubernostrum »

bane wrote: post #71
masklinn wrote: post #33

Earlier quoted context omitted.

> You must build an airport Most definitely not. You do need to rent or buy space (and ideally slots) at a bunch of airports. You can also lease planes.

You can also be a contract airline that fills up routes for other airlines. Lots of the "operated by xyz airline" on weird routes are run by airlines that nobody has ever heard of outside of that notice on their ticket.

I mostly fly with, and credit my miles to, US Airways, but I end up on more United flights than I'd care to in order to fill some gaps (riding a turboprop direct MCI-DEN is better than flying on A319s and connecting in Phoenix). For some time now the joke about United has been that the only mainline flights left are the international routes and the hub-to-hub connections.

And then the other day I saw someone point out that there are now hub-to-hubs on United Express regional jets.

Re: Starting an Airline

#170

Post by SoftwareMaven »

Shenglong wrote: post #142

Here's an investment banker joke I've been hearing oddly often recently: "How do you get a million dollars?" -> "Invest a billion dollars in the airline industry". On a more serious note: there's a lot of talk on this page about the finance and logistics of starting a company like this - but I think the human factor is also worth mentioning. I fly a moderate amount, and whenever I have an hour or so to spare on a lay…

Pilot salaries are all based on union contracts. Union contracts are all negotiated by union leaders. Union leaders are all senior pilots. Senior pilots have a strong incentive to negotiate contracts that pay senior pilots the most, even if it is at the expense of new pilots.

I know a guy who flies less than 20 hours a month but makes well over $100k/year. He's been a pilot for over 20 years and knows how to work the rules so he makes money even when he's not flying (being on standby and such).

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